02/06/2002 01:12 PM House JUD
| Audio | Topic |
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+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE JUDICIARY STANDING COMMITTEE
February 6, 2002
1:12 p.m.
MEMBERS PRESENT
Representative Norman Rokeberg, Chair
Representative Scott Ogan, Vice Chair
Representative Jeannette James
Representative John Coghill
Representative Kevin Meyer
MEMBERS ABSENT
Representative Ethan Berkowitz
Representative Albert Kookesh
OTHER LEGISLATORS PRESENT
Senator Jerry Ward
COMMITTEE CALENDAR
HOUSE BILL NO. 362
"An Act extending the termination date of the Board of Governors
of the Alaska Bar Association."
- MOVED HB 362 OUT OF COMMITTEE
HOUSE BILL NO. 297
"An Act related to aggravating factors at sentencing."
- MOVED CSHB 297(JUD) OUT OF COMMITTEE
HOUSE BILL NO. 85
"An Act relating to conduct directed at a school employee as an
aggravating factor for criminal sentencing purposes."
- HEARD AND HELD
CS FOR SENATE JOINT RESOLUTION NO. 23(FIN) am
Proposing amendments to the Constitution of the State of Alaska
relating to an appropriation limit and a spending limit.
- MOVED HCS CSSJR 23(JUD) OUT OF COMMITTEE
PREVIOUS ACTION
BILL: HB 362
SHORT TITLE:EXTEND BOARD OF GOVERNORS OF AK BAR ASSN
SPONSOR(S): REPRESENTATIVE(S)MURKOWSKI
Jrn-Date Jrn-Page Action
01/28/02 2080 (H) READ THE FIRST TIME -
REFERRALS
01/28/02 2080 (H) JUD, FIN
02/06/02 (H) JUD AT 1:00 PM CAPITOL 120
BILL: HB 297
SHORT TITLE:AGGRAVATOR FOR SEXUAL OFFENSES
SPONSOR(S): REPRESENTATIVE(S)MEYER
Jrn-Date Jrn-Page Action
01/14/02 1952 (H) PREFILE RELEASED 1/4/02
01/14/02 1952 (H) READ THE FIRST TIME -
REFERRALS
01/14/02 1952 (H) JUD, FIN
01/30/02 (H) JUD AT 1:00 PM CAPITOL 120
01/30/02 (H) Heard & Held
MINUTE(JUD)
02/06/02 (H) JUD AT 1:00 PM CAPITOL 120
BILL: HB 85
SHORT TITLE:AGGRAVATING FACTORS IN SENTENCING
SPONSOR(S): REPRESENTATIVE(S)COGHILL
Jrn-Date Jrn-Page Action
01/22/01 0143 (H) READ THE FIRST TIME -
REFERRALS
01/22/01 0143 (H) EDU, HES, JUD
02/14/01 0328 (H) COSPONSOR(S): DYSON
04/11/01 (H) EDU AT 8:00 AM CAPITOL 106
04/11/01 (H) Moved Out of Committee --
Location Change --
04/11/01 (H) MINUTE(EDU)
04/12/01 0986 (H) EDU RPT 4DP 1NR
04/12/01 0987 (H) DP: PORTER, GREEN, GUESS,
BUNDE;
04/12/01 0987 (H) NR: JOULE
04/12/01 0987 (H) FN1: ZERO(COR)
04/12/01 0987 (H) FN2: ZERO(LAW)
04/17/01 1021 (H) COSPONSOR(S): GUESS
04/21/01 1111 (H) HES RPT 6DP 1NR
04/21/01 1112 (H) DP: COGHILL, KOHRING, WILSON,
CISSNA,
04/21/01 1112 (H) STEVENS, DYSON; NR: JOULE
04/21/01 1112 (H) FN1: ZERO(COR)
04/21/01 1112 (H) FN2: ZERO(LAW)
04/21/01 1112 (H) REFERRED TO JUDICIARY
04/21/01 1123 (H) COSPONSOR(S): STEVENS
04/21/01 (H) HES AT 11:00 AM CAPITOL 106
04/21/01 (H) Moved Out of Committee --
Time Change --
04/21/01 (H) MINUTE(HES)
01/18/02 (H) JUD AT 1:00 PM CAPITOL 120
01/18/02 (H) Heard & Held
01/18/02 (H) MINUTE(JUD)
02/06/02 (H) JUD AT 1:00 PM CAPITOL 120
BILL: SJR 23
SHORT TITLE:CONST AM: APPROPRIATION/SPENDING LIMIT
SPONSOR(S): SENATOR(S) DONLEY
Jrn-Date Jrn-Page Action
04/09/01 1013 (S) READ THE FIRST TIME -
REFERRALS
04/09/01 1013 (S) FIN
04/11/01 1080 (S) COSPONSOR(S): AUSTERMAN
04/17/01 (S) FIN AT 9:00 AM SENATE FINANCE
532
04/17/01 (S) Heard & Held
04/17/01 (S) MINUTE(FIN)
05/03/01 1462 (S) FIN RPT CS 4DP 2DNP 3NR SAME
TITLE
05/03/01 1462 (S) DP: DONLEY, GREEN, LEMAN,
WARD;
05/03/01 1462 (S) NR: KELLY, AUSTERMAN, WILKEN;
05/03/01 1462 (S) DNP: HOFFMAN, OLSON
05/03/01 1462 (S) FN1: (GOV)
05/03/01 1465 (S) RULES TO CALENDAR 1OR 5/3/01
05/03/01 1471 (S) READ THE SECOND TIME
05/03/01 1471 (S) FIN CS ADOPTED UNAN CONSENT
05/03/01 1471 (S) COSPONSOR(S): LEMAN, KELLY
05/03/01 1471 (S) ADVANCED TO 3RD READING
FAILED Y14 N6
05/03/01 1472 (S) ADVANCED TO THIRD READING 5/4
CALENDAR
05/03/01 (S) FIN AT 9:00 AM SENATE FINANCE
532
05/03/01 (S) Moved CS(FIN) Out of
Committee
05/03/01 (S) RLS AT 1:45 PM FAHRENKAMP 203
05/03/01 (S) MINUTE(FIN)
05/03/01 (S) MINUTE(RLS)
05/04/01 1502 (S) READ THE THIRD TIME CSSJR
23(FIN)
05/04/01 1502 (S) RETURN TO SECOND FOR AM 1
UNAN CONSENT
05/04/01 1502 (S) AM NO 1 ADOPTED UNAN CONSENT
05/04/01 1503 (S) AUTOMATICALLY IN THIRD
READING
05/04/01 1503 (S) PASSED Y14 N6
05/04/01 1503 (S) ELLIS NOTICE OF
RECONSIDERATION
05/05/01 1526 (S) RECON TAKEN UP - IN THIRD
READING
05/05/01 1526 (S) PASSED ON RECONSIDERATION Y14
N6
05/05/01 1559 (S) TRANSMITTED TO (H)
05/05/01 1559 (S) VERSION: CSSJR 23(FIN) AM
05/05/01 1571 (H) READ THE FIRST TIME -
REFERRALS
05/05/01 1571 (H) JUD, FIN
10/19/01 (H) JUD AT 11:00 AM Anch LIO Conf
Rm
10/19/01 (H) Heard & Held
10/19/01 (H) MINUTE(JUD)
02/06/02 (H) JUD AT 1:00 PM CAPITOL 120
WITNESS REGISTER
REPRESENTATIVE LISA MURKOWSKI
Alaska State Legislature
Capitol Building, Room 408
Juneau, Alaska 99801
POSITION STATEMENT: Testified as the sponsor of HB 362.
MAURI LONG, President
Alaska Bar Association (ABA)
510 L Street, Number 603
Anchorage, Alaska 99501
POSITION STATEMENT: Testified in support of [HB 362].
BARBARA WILLIAMS, President
Alaska Injured Workers
PO Box 101093
Anchorage, Alaska 99510
POSITION STATEMENT: Testified in support of [HB 362] and
recommended amending it.
STEPHEN VAN GOOR, Bar Counsel
Alaska Bar Association (ABA)
510 L Street, Number 603
Anchorage, Alaska 99501
POSITION STATEMENT: Addressed Ms. Williams's concerns.
SENATOR DAVE DONLEY
Alaska State Legislature
Capitol Building, Room 506
Juneau, Alaska 99801
POSITION STATEMENT: Testified on HB 362. Testified as the
sponsor of SJR 23.
DAVID TEAL, Legislative Fiscal Analyst
Legislative Finance Division
Alaska State Legislature
PO Box 113200
Juneau, Alaska 99811-3200
POSITION STATEMENT: During discussion of SJR 23 responded to
questions.
BRAD PIERCE, Senior Economist
Office of the Director
Office of Management & Budget (OMB)
Office of the Governor
PO Box 110020
Juneau, Alaska 99811-0020
POSITION STATEMENT: Testified in opposition to SJR 23 and
responded to questions.
ACTION NARRATIVE
TAPE 02-10, SIDE A
Number 0001
CHAIR NORMAN ROKEBERG called the House Judiciary Standing
Committee meeting to order at 1:12 p.m. Representatives
Rokeberg, Ogan, Coghill, and Meyer were present at the call to
order. Representative James arrived as the meeting was in
progress. Senator Ward was also in attendance.
HB 362 - EXTEND BOARD OF GOVERNORS OF AK BAR ASSN
Number 0070
CHAIR ROKEBERG announced that the first order of business would
be HOUSE BILL NO. 362, "An Act extending the termination date of
the Board of Governors of the Alaska Bar Association."
Number 0100
REPRESENTATIVE LISA MURKOWSKI, Alaska State Legislature,
testified as the sponsor of HB 362. She informed the committee
that [the Board of Governors] of the Alaska Bar Association was
established in 1955 in order to ensure that only qualified
members of the legal profession are practicing. In addition to
the licensing aspect, the association also deals with the
disciplinary end of the profession. Currently, the Alaska Bar
Association (ABA) regulates 2,719 licensed attorneys.
Representative Murkowski directed attention to the audit by the
Division of Legislative Budget & Audit, which was included in
the committee packet. The audit reviewed the [ABA} with regard
to whether it meets the public need. The report came back with
a fairly good recommendation and assessment of the [ABA]. The
report states, "The regulation and licensure of attorneys
contributes to the protection of the public's welfare. We
recommend the legislature extend the termination date to June
30, 2006." She encouraged the committee to extend the board to
June 30, 2006.
Number 0274
MAURI LONG, President, Alaska Bar Association (ABA), informed
the committee that the [ABA] reviewed the audit and made some
comments that are included in the backup of the audit report.
Ms. Long said that [the ABA] feels that the Board of Governors
of the Alaska Bar Association should continue for another four
years. She offered to answer any questions.
REPRESENTATIVE OGAN asked if Alaska has the highest ratio of
attorneys per capita in the nation.
MS. LONG related her understanding that Washington, D.C., has
more attorneys.
Number 0390
BARBARA WILLIAMS, President, Alaska Injured Workers, testified
via teleconference. Ms. Williams announced that she approves of
the sunset audit for the Board of Governors of the Alaska Bar
Association, which she feels is a critical tool. Ms. Williams
said:
I seek an amendment to the statute to ... condition
... the extension of the authority for the [Board of
Governors of the Alaska Bar Association] on a change
of membership. My concern is not motivated by
ideological bias or like or dislike for legal
professionals.
As an unpaid lay educator I work with hundreds of
injured workers who cannot find legal representation.
I am often referred workers by Alaska attorneys to
help them with their contested claims. Invariably,
these workers must contest their claims against
licensed attorneys in administrative and legal
proceedings. I have asked the [ABA] to monitor the
behavior of the attorneys, and I know that Alaska
Public Interest Research Group (AkPIRG) has also asked
them to monitor the behavior of the attorneys on an
ongoing basis to determine ... if ethical or
professional violations occur. The [ABA] has refused
to hear us on this issue.
For that reason, I ask you to amend the statute as a
condition of its extension to include a lay person who
is specifically familiar with the situations where
unrepresented persons must negotiate and litigate
against represented persons. I am certain that from
that position, the [ABA] and the Alaska State Supreme
Court can be motivated to police the behavior of
licensed attorneys when they contest claims against
ordinary working people with no legal skills.
Number 0561
STEPHEN VAN GOOR, Bar Counsel, Alaska Bar Association (ABA),
informed the committee that he is charged with supervising the
disciplinary section that investigates complaints against
attorneys. Mr. Van Goor noted that he also acts as the general
counsel to the Board of Governors in regards to rule making and
other matters affecting the [ABA]. He acknowledged that Ms.
Williams's group had made a presentation to the board about two
years ago, but he felt that Ms. Williams's characterization that
the board refused to hear or be concerned with the issues raised
at that presentation is inaccurate. "The board is acutely
aware, as is the Alaska Supreme Court, that there are a number
of individuals in the State of Alaska who are not adequately
served by the legal system because of the expense of the legal
system," he explained. One of the responsibilities of the [ABA]
is to ensure that those providing legal services do so in a
competent and ethical manner.
MR. VAN GOOR explained that any time an individual has a
complaint against a member, the [ABA] evaluates the complaint
and takes appropriate action. Mr. Van Goor was unaware of any
significant increase in complaints in the workers' compensation
lawyers. Therefore, he wasn't in a position to say that such is
a problem facing the [ABA]. He relayed his understanding that
Ms. Williams's organization had intended for workers'
compensation proceedings to be monitored [by the ABA]. However,
the [ABA] doesn't have the capacity to monitor the proceedings
of the workers' compensation board and the many cases that are
adjudicated each year. He noted that since [the ABA] does have
the responsibility to investigate complaints, if Ms. Williams or
her group has complaints regarding particular lawyers, then [the
ABA] would [investigate]. Mr. Van Goor said he'd understood Ms.
Williams to be concerned with the fact that workers'
compensation is a specialized area of practice and there aren't
many lawyers involved in such. Still, Mr. Van Goor assured the
committee that complaints made against the Workers' Compensation
Board would be reviewed by the [ABA].
Number 0737
SENATOR DAVE DONLEY, Alaska State Legislature, informed Ms.
Williams that last year the legislature amended the authority of
the Division of Insurance, and this means that the Division of
Insurance can now investigate and take action against individual
consumer complaints in the workers' compensation area. He
identified part of the problem as being the statutory
compensation levels that attorneys can receive for workers'
compensation claims. Senator Donley remarked that in
discussions with Bob Lohr, Director, Division of Insurance,
Department of Community & Economic Development, he [understood]
that [the division] has been actively pursuing workers'
compensation complaints over the past year.
CHAIR ROKEBERG announced that the public hearing on HB 362 was
closed.
Number 0807
REPRESENTATIVE OGAN moved to report HB 362 out of committee with
individual recommendations and the accompanying [zero] fiscal
note. There being no objection, HB 362 was reported from the
House Judiciary Standing Committee.
HB 297 - AGGRAVATOR FOR SEXUAL OFFENSES
Number 0828
CHAIR ROKEBERG announced that the next order of business would
be HOUSE BILL NO. 297, "An Act related to aggravating factors at
sentencing." He noted that before the committee was version LS-
221186\O, Luckhaupt, 1/31/02 [which incorporated the amended
amendment adopted on 1/30/02]. He also noted, however, that per
the subcommittee report, "Version L" should be adopted as the
new work draft.
Number 0883
REPRESENTATIVE MEYER moved to adopt the proposed committee
substitute (CS) for HB 297, version 22-LS1186\L, Luckhaupt,
1/31/02, as the work draft. There being no objection, Version L
was before the committee.
REPRESENTATIVE MEYER explained that Version L, in addition to
incorporating the amendment adopted at the previous hearing,
references the existing statutory definition of "incapacitated"
by citing the statute where that definition is found. Based on
the discussion with committee members, he said he believes that
committee members will be more comfortable with this
clarification. Furthermore, this clarification narrows the
scope of the bill to its initial intent, which was to make the
use of date rape drugs and/or excessive alcohol an aggravator
that a judge may consider in sentencing.
REPRESENTATIVE MEYER recalled that Representative Berkowitz had
expressed concern regarding the need for the aggravator itself.
Since that time, Standing Together Against Rape (STAR) has
provided examples of related cases in which the court didn't use
[AS 12.55.155(c)(5)] in sentencing. Representative Meyer said
he and [STAR] feel that had this aggravator been in place, it
would've been clear to the court that it could've used the
aggravator in the sentencing. He reiterated that this
aggravator would only apply to the sentencing.
REPRESENTATIVE OGAN relayed his belief that [Version L] is a
better bill because it reduces the possibility of unintended
consequences.
Number 0987
REPRESENTATIVE OGAN moved to report the proposed committee
substitute (CS) for HB 297, version 22-LS1186\L, Luckhaupt,
1/31/02, out of committee with individual recommendations and
the accompanying fiscal notes. There being no objection, CSHB
297(JUD) was reported from the House Judiciary Standing
Committee.
HB 85 - AGGRAVATING FACTORS IN SENTENCING
Number 1035
CHAIR ROKEBERG announced that the penultimate order of business
would be HOUSE BILL NO. 85, "An Act relating to conduct directed
at a school employee as an aggravating factor for criminal
sentencing purposes." He noted that HB 85 had been assigned to
a subcommittee during the bill's previous hearing.
REPRESENTATIVE COGHILL, as the sponsor, pointed out that when
this bill was first heard, he felt that [the committee] veered
off the path a bit with regard to what the aggravator was
intended to do. [House Bill 85] attempts to address those
employed in a school, doing official duties, who are
deliberately attacked. Since school employees are required [to
pay careful attention to] public safety issues, he said he felt
that an aggravator for crimes against that particular segment
[of the population] would be good for a judge to have when
sentencing. He noted that the issues raised at the bill's
previous hearing were related to the "school employee" and
"exercise of official duties" language. He informed the
committee that a "school employee" is someone who is employed by
the school. However, he noted, "It is true that it could be
directly traceable to those directly employed in that
institution." Therefore, he felt that this would apply to those
working under contractual agreements. He related his belief
that that's appropriate, and therefore he didn't want that
language taken out, since employees are charged with specific
duties that aren't necessarily given to volunteers. He
concluded by requesting that the committee pass the bill on.
CHAIR ROKEBERG asked if anyone wished to testify on HB 85.
There being no one, the public testimony on HB 85 was closed.
Number 0212
REPRESENTATIVE COGHILL moved to report HB 85 out of committee
with individual recommendations and the accompanying zero fiscal
notes.
CHAIR ROKEBERG, in response to Representative Ogan, clarified
that the motion is referring to the original version of the
bill.
REPRESENTATIVE OGAN objected.
The committee took an at-ease from 1:30 p.m. to 1:31 p.m.
REPRESENTATIVE OGAN opined that he wanted to make everybody
that's on school grounds safer, whether they are school district
employees, students, or members of the general public; he wanted
to send a message that schools, as a whole, are a bad place to
commit any kind of violent crime. He emphasized his belief that
violence against anyone on [school grounds] should be subject to
an aggravator. He pointed out that this is the same objection
he voiced [at the prior hearing on HB 85].
REPRESENTATIVE COGHILL said that he didn't entirely disagree
with Representative Ogan. However, he noted, the problem is
that "we've" already decided to hold people employed by the
school to a higher standard of accountability, and HB 85 will
offer them a higher degree of protection should they get
assaulted while performing their official duty. And although he
agrees that the scope of [school safety] needs to be broader
than what HB 85 provides for, he said that he felt that other
laws are addressing that issue. He reiterated his remarks that
school employees are already held to a higher [standard of
accountability] and thus crimes against them should be subject
to an aggravator.
CHAIR ROKEBERG agreed with Representative Coghill that [HB 85]
is establishing a class of people - school employees, as opposed
to the general public - that will have [access] to the
aggravator. Chair Rokeberg said that he felt this distinction
is justifiable, reminding members that crimes committed against
persons not employed by the school would still be prosecuted
under the law. He related his belief that without a sideboard,
there would be no end to [the umbrella] this would create.
Furthermore, going beyond [a specific class] seems to confuse
the issue. He announced that he would support the adoption of
HB 85.
REPRESENTATIVE OGAN maintained his objection, citing the need to
send a message that anyone who commits a felony against someone
on school grounds during school business hours would be subject
to the aggravator.
CHAIR ROKEBERG announced that HB 85 would be held over.
SJR 23 - CONST AM: APPROPRIATION/SPENDING LIMIT
Number 1565
CHAIR ROKEBERG announced that the final order of business before
the committee would be CS FOR SENATE JOINT RESOLUTION NO.
23(FIN) am, Proposing amendments to the Constitution of the
State of Alaska relating to an appropriation limit and a
spending limit. [Before the committee was version 22-LS0734\P,
Cook, 9/4/01, which was adopted as a work draft on 10/19/01.]
Number 1576
SENATOR DAVE DONLEY, Alaska State Legislature, testifying as the
sponsor of SJR 23, explained that SJR 23 proposes a
constitutional amendment to modify the existing appropriation
limit in the Alaska State Constitution. He remarked that
subsequent to the interim meeting in which SJR 23 was heard the
first time, he took members' input and crafted another proposed
committee substitute (CS) for consideration.
Number 1600
REPRESENTATIVE COGHILL moved to adopt the proposed House
committee substitute (HCS), version 22-LS0734\R, Cook, 2/4/02,
as a work draft. There being no objection, Version R was before
the committee.
SENATOR DONLEY explained that the first change incorporated in
Version R allows for a higher level of spending with a [three-
fourths] vote so that there would be a three-step process.
"You'd have a standard 2 percent annual increase ... available
with a simple majority vote; ... a 3 percent increase ...
available with a two-thirds vote; and a 4 percent increase
available with a [three-fourths] vote." He noted that the
committee made this suggestion back in October regarding a third
level for dealing with unexpected growth. He pointed out that
there are already provisions that exclude any disasters or
emergency funding, so they don't count towards this limit. This
aforementioned third level would deal with any increased need
for services that a particularly large influx of people to
Alaska in a given year might generate.
SENATOR DONLEY said that the second change incorporated in
Version R clarifies that only amounts paid out in permanent fund
dividends (PFDs) are excluded from the spending limit. The
phrasing in the prior version, he noted, could have possibly
been interpreted as excluding administrative costs of the
Permanent Fund Dividend Division from the spending limit, and
that was not the intent. He opined that one of the biggest
flaws with the existing appropriation limit is that nobody knows
how to define [it]; "you've got to guess that it's over $6
billion, but a lot of the terms are so vague that it's imprecise
in its definition." In order to be as precise as possible with
the definition in [SJR 23], he noted, he has tried to keep in
mind lessons learned from over a decade of experience with the
existing limit, as well as from past problems encountered
regarding definitions.
Number 1720
SENATOR DONLEY said that the third change incorporated in
Version R involves inclusion of a "specific-dollar starting
amount" for the first two fiscal years in which the amendment
would apply. He noted that there was some concern with the
formula in a prior version of SJR 23 because the starting years
would have been based on years for which the levels were
unknown, since a budget has not yet been formulated. So it was
unclear what would happen in the "out" years, and if there was a
big change between this year [and] last year, or this year [and]
next year, he said, "you could have a spending limit that kind
of bounced along." To keep that from happening, to have a nice
solid, reasonable increase projected, by going to fixed points
for just the first two years, he offered, "you've created a
situation where you could have ... a smooth spending increase on
the out years." He noted, however, that after that, [a smooth
spending increase] will be dependent upon what expenditures are
made, so if, in a subsequent year, the legislature and the
governor chose not to spend up to the limit, it would just "kind
of flatten out and then go up from there."
SENATOR DONLEY said that those numbers were derived by simply
taking the fiscal year 2002 (FY 02) amount of $2.4 billion -
rounded off - and increasing that by 4 percent, which produced
the number for the first year - the FY [04] spending amount. In
response to a question, he confirmed that his letter dated
2/5/02 states "$3.2 billion" and that this number is correct.
Under the appropriation limit, he explained, it doesn't exactly
correlate with just general funds; the actual amount under the
constitutional definition is a higher level than just general
funds.
SENATOR DONLEY opined that [Version R] is rather generous. To
recap some of what was heard on 10/19/02, he said:
We had testimony from economists that said that this
seemed like a reasonable amount of growth to allow
for, based on past experience, and it also seemed like
it was a reasonable time period to provide for an
automatic review, which we have done. ... After a
certain number of years there's an automatic review,
and the feeling was that that was an appropriate
amount of time to go back and allow the voters to take
another look at it, make sure its working; if it [is]
not, they are guaranteed an opportunity to take it off
the books.
Number 1901
And that it would seem probably rather generous to
those of us that would really like to [have] state
spending hold the line and not increase, but [at] the
same time, I think it is a reasonable compromise ...
and it's vastly superior to the existing
constitutional language, which everybody agrees makes
no sense. It's hard to figure out what it exactly
does mean; the average citizen reading the
constitution would not get [an] accurate conveyance of
how it's currently being interpreted. There's the
"one-third for capital" provision, which has never
been followed, Mr. Chairman, [and] this is very
misleading to ... have in the [Alaska State]
Constitution. ... It's completely ineffectual,
because even the best guess of what the current limit
is, is over $6 billion, so it's almost twice as much
as this particular proposal would allow.
SENATOR DONLEY continued:
So although this is not proposed as an "end all, be
all" solution to the current fiscal gap, it's a vast
improvement - working with the knowledge we've
gathered over more than a decade of experience with
existing constitutional language - [in] trying to come
up with a reasonable, effective, constitutional
spending limit.
REPRESENTATIVE MEYER said that he agrees "something like this is
needed first, before we can even talk about tapping into
somebody's permanent [fund] dividend or even [having] a new tax
increase." He asked what the inflation rate has been over the
last several years, and whether it has been approximately what
is being proposed in [SJR 23] - "about 2 percent each year."
SENATOR DONLEY said that according to his recollection it has
been about 1.7 percent.
Number 2047
DAVID TEAL, Legislative Fiscal Analyst, Legislative Finance
Division, Alaska State Legislature, confirmed that amount, but
noted that the "permanent fund uses about a 3 [to] 3.25 percent
for long-range inflation."
REPRESENTATIVE MEYER sought confirmation that if an emergency
arose and additional money was needed, then "with a [three-
fourths] vote, we can go above that amount for emergencies."
SENATOR DONLEY reiterated that emergency funding is excluded
from the spending limit. "We have a definition that the
governor could follow for ... an emergency situation or for
disaster funding, and both those aren't counted," he added;
"they wouldn't go into the base for future years because by
their very definition, they're an extraordinary expenditure for
one particular year." He noted that those expenditures would
not even require a two-thirds vote. He continued: "But let's
say there was some sort of unforeseen ... special circumstances
that didn't really classify ... as an emergency or a disaster;
then, by using the [three-fourths vote], you could certainly
argue for accessing more money."
REPRESENTATIVE MEYER opined that the Municipality of Anchorage's
tax cap serves as a spending cap because property taxes are the
only source of income. He mentioned, however, that he does not
think that a similar tax cap would work on a statewide basis,
since he does not agree with the premise that "taxes are needed
first." "I think we first need to get our spending in line," he
stated, and asked Senator Donley whether he agreed.
SENATOR DONLEY said:
I've heard a lot of support for this proposal from
folks who say that a lot of local governments already
live within restraints upon their budgeting process.
Whether it's a tax cap or a spending cap, these are
pretty common in local government and they've worked
real well. If the voter's don't want them, they can
always take them off by initiative or [by voting] to
amend their charters. But they haven't. ...
Obviously, the tax cap in Anchorage has been very
popular with the citizens, and has stayed successfully
for many years now.
... Obviously, I would prefer not to have artificial
restraints of that manner. But the fact is, in a
representational democracy, there's huge pressures for
always more, more, more spending, and I do think this
is a reasonable, fundamental first step. ... The
difference between a tax cap and a spending cap is
that we're starting with a bigger fiscal-gap situation
right now.... I support doing as much as we can to
clean up and make state government as efficient and
fair in its spending as possible, before we do major
new taxes. But at some point in time, we're probably
going to have to do new revenues. And so I wouldn't
really support doing a tax cap first; first I'd like
to get control over the spending side of it, and do
the best we can with what we have, and then look to
revenues.
Number 2215
REPRESENTATIVE MEYER indicated agreement. He posited that
having a spending cap "forces you to prioritize"; it's important
to prioritize in order to determine which services state
government should be providing and which ones it shouldn't. He
said he would be supporting SJR 23.
REPRESENTATIVE OGAN noted that he has seen constitutional
amendments result in unintended consequences. He asked Senator
Donley whether he is aware of any unintended consequences that
SJR 23 might engender in 20 years. He noted that if SJR 23 were
to be adopted by both the legislature and the voters, it would
be enshrined in the [Alaska State] Constitution. He asked:
"Put on your 20/20 glasses - is this going to work then?"
SENATOR DONLEY said:
I've been trying to be real clear that I don't think
that this is an excuse not to continue to work to do
other things to solve the fiscal gap. ... I think
this is a good, fundamental step. ... There's no
question [that] the [Alaska State] Constitution, as it
is now, just doesn't work - it doesn't make sense. So
it should be addressed, but I wouldn't want this to be
seen as the "catch all, be all," because I've never
conveyed it to be that.... I just think it's one,
good, fundamental building block towards developing a
new long-range fiscal plan. So I wouldn't want ... -
by passing it - [for] people to say, "Oh, well, now
we've solved the problem," because we haven't. But we
are creating a really solid foundation towards moving
towards solving the problem ... so that's one thing
that I wouldn't want see as an unintended consequence.
Number 2296
As far as the actual functioning of it, I think it's
pretty generous in its allowance for ... additional
spending. From my point of view, it's probably more
generous than I'd like to see. ... And I would hope
that as it goes into effect, ... future legislatures
see it as just what it is: it's [an] appropriation or
a spending cap - and not a goal - each year. I would
like to see it ... so it's not [viewed as], "Oh, well,
this year we're going to spend that much." The debate
should be, ... "What do we need to spend," and not
just, "Oh, the cap's this, so we'll go to that." ...
Obviously, that's not really going to be a downside
because, as it is now, we have no cap at all. But I
wouldn't like it to become the goal each year -
spending that much - because I'd like to actually see
us, as much as possible, improve the efficiency of
government and hold down spending.
SENATOR DONLEY continued:
But the way it [is] here, Representative Ogan, I think
it's going to facilitate that, because if you can hold
the line in one year, ... it grows slowly.... You're
going to slow down the growth of the cap, ... rather
than it just automatically growing more and more each
year. And I think that's the importance of tying the
limit for one year to a close previous year, rather
than [the] existing constitutional provision that ties
it to a point in time all the way back to 1981. It
just doesn't make sense. So that might be ... the
thing that I would see the most.
REPRESENTATIVE OGAN noted that there are provisions in the
[Alaska State] Constitution now - spending provisions - that
require certain percentages of the budget to be spent, for
example, on the capital budget "and things like that." He also
noted, "Of course, we don't do that, ... and I suppose if
someone litigated, they'd probably win the case." "So that's
not being enforced and that's constitutional law, so ... do you
think this will be enforced?" he asked.
Number 2395
SENATOR DONLEY said:
We've had the advantage of having over a decade of
experience with the existing appropriation limit. So
we've learned a lot. ... We've had a lot of time to
think about it and work on it and improve on it, ...
so I think this is going to do a lot better than the
existing one. You can understand it ...; it's got a
definition of what's in and what's out that the
financial people will be able to understand.
Second, to go to the specifics of your question, the
current "one-third to capital" provision - at least
one-third of the budget's supposed to go to capital -
there's [an] attorney general's opinion that says that
only applies if you spent up to the full $6 billion
that's allowed. [The Alaska State Constitution]
doesn't say that, that's just an AG's opinion of what
it says, but because of that opinion, the thing's been
ignored. I don't think it's ever been followed. And
[for] all practical purposes, if ... today we were
forced to use one-third for capital, we would have a
real problem.
So I think it makes sense to get that out of the
[Alaska State] Constitution. And this proposal does
get it out of the constitution and allow
[legislators], from legislature to legislature, to
decide the appropriateness of what the level of the
capital budget ought to be, rather than have some
arbitrary one-third in the [Alaska State]
Constitution.
REPRESENTATIVE OGAN asked what would happen if Alaska gets the
Arctic National Wildlife Refuge (ANWR) opened [to oil and gas
exploration] and/or a gas pipeline [is built], and the state's
population really grows: "Does this amendment restrict state
spending to the point where we're not going to be able to meet
the demands for those services?" And even if people are willing
to step up to the plate and pay taxes, does this amendment deal
with that, he also asked.
SENATOR DONLEY said:
I think it does. Remember the testimony we heard in
October, that the numbers in here are pretty
reasonable, [and] that they are comparable to the
growth that we experienced under the five-year plan,
where we were being very conservative - fiscally
conservative - and actually reducing .... [Tape
changed sides mid-sentence.]
TAPE 02-10, SIDE B
Number 2482
SENATOR DONLEY continued [mid-sentence]:
... mission as it appears here. And that the
testimony we received in October was [that] this was a
reasonable amount of growth compared to our past
experience. So I think it does take care of that.
And also, it's required that after only four years,
this goes back before the voters. If the voters
approved it in this general election, they would see
it automatically again within four years.
Now, I would suggest that [with] the gas line or even
ANWR, there's no way we're going to experience a major
economic boom within a four-year period. ... And that
was the testimony in October also, that this is a
reasonable period of time to have it subject to review
again, because you'll be able to really have data [to]
see how it's working. Obviously, we'll (indisc.) how
to address the other issues on the fiscal gap before
us, within that period of time, ... but yet ...
there's nothing on the horizon that's going to show a
giant potential boom within that four-year period.
It may come soon after that; I hope it does, but it's
doubtful it's going to happen in four years - ... that
great a growth. And even if you did, ... in this
committee substitute, have the ability to increase -
double - what we have traditionally (indisc.) our
experience over the last five or six years. So you've
got some flexibility there. So I think it does handle
it, and to ... make it even better, ... there's
another automatic review every six years after that -
after the first four years. So unlike the existing
appropriation ... language in the [Alaska State]
Constitution, the voters are going to be guaranteed to
be able to see this again and say, "Yes" or "No," "We
think it's working" or "We don't think it's working,"
and get rid of it if it isn't.
Number 2421
REPRESENTATIVE COGHILL noted that one of the things that catches
his eye is that "we're making exception to the appropriation for
bond obligations." He asked whether this was going to put
pressure on the [state] to increase its bond obligation beyond
its ability to pay.
SENATOR DONLEY said that that is a really important point that
he probably should have raised. "That was one of the other
relief valves that's contained in this amendment," he offered;
since bonding money that's approved by the voters - general
obligation (GO) bonds - is outside the limit, that's a way, "if
you've really got a problem," to be able to free up some more
funds. He opined that such a provision is appropriate because
GO bonds, which haven't been utilized [by the state] in a long
time, have to get a public, statewide vote of approval. He
added that he thinks it's reasonable to allow going over the
limit [as long as] the public votes on, and approves, what that
extra money is being spent on. "So you've got a safety valve
there; it's outside the limit. And so, clearly, ... there's not
a problem paying for it, other than the normal problem of paying
for these things, which is the fiscal gap," he said.
CHAIR ROKEBERG posited that Representative Coghill's concerns
revolve around the state's "debt credit worthiness," if the
state went too far "that way." He added:
I would just say that I think that the bond [covenant]
of whatever existing inventory was out there, and/or
the bond counsels and Wall Street, would dictate
whether or not we were being overzealous in our
borrowing, because we would find out in terms of our
ratings and so forth. So that would be a damper; plus
the legislature has to approve whatever's offered out
to the citizens, unless it's a COP (Certificate Of
Participation) or something like that.
REPRESENTATIVE COGHILL said that he agrees with Chair Rokeberg,
but noted that in Alaska, "we have a propensity to put pressure
in one area and rupture ... another, so I just want to make sure
that that is something we really watch." He mentioned the issue
of reviewing a single constitutional provision when called upon
for a "constitutional convention vote every ten years." He also
made reference to when the provisions encompassed in SJR 23 go
back out for public review.
Number 2285
SENATOR DONLEY said:
Representative Coghill's really accurate; this hasn't
been done any time recently that I know of, but it has
been done before in the history of the state. In
fact, I think the original appropriation limit had [a]
ten-year review provision and was actually
subsequently approved by the voters; that's my memory
from researching that. So it is very unusual, it has
not been used much, but it isn't totally unheard of.
CHAIR ROKEBERG noted that the voter's pamphlet for the 1982
general election stated that the appropriation limit of $2.5
billion proposed by Ballot Measure No. 4 would be reconsidered
by the voters at the 1986 general election. He also noted that
"in 1980 the GF portion of the budget was $4.1 billion, ... two
years prior to the first spending initiative."
REPRESENTATIVE COGHILL said that beyond bond voting, then, there
is still the question of "having appropriations becoming the
issue of a vote." He asked: Are we going to put tension on
other areas of [the Alaska State] Constitution? In an attempt
to clarify, he said, "Just on voting for appropriations, from
the general public, has been something that has been discussed
in this legislature, and I'm just wondering if this is going to
bump into that discussion."
SENATOR DONLEY said: "I don't think it should. I understand
where you're going here, but because the GO debt is excluded
from the limit, I don't think you're going to have a problem.
... And the amount that would be under the limit is the 'non GO
debt' ... as defined in the language here."
REPRESENTATIVE OGAN, after noting that the power of
appropriation lies with the legislature, posited that perhaps
Representative Coghill's concern centers around the question of
whether [SJR 23] would result in delegating the legislature's
authority to appropriate.
SENATOR DONLEY acknowledged that it is certainly a limitation on
legislative authority to appropriate, but it's one that already
exists, in another form, in the [Alaska State] Constitution.
Number 2127
CHAIR ROKEBERG noted that it has never come under "a court
challenge because it was ill-founded to begin with."
SENATOR DONLEY pointed out that [this limitation] is being
proposed by the legislature, which is the branch of government
that has the larger responsibility to deal with such issues.
CHAIR ROKEBERG offered the analogy: "Tie my own hands - I can't
trust myself."
SENATOR DONLEY acknowledged that the press has written articles
saying, "Oh, stop us before we spend again." He posited that
Alaskan legislators, by and large, have been very responsible.
He noted that in meeting with the "governor's budget people"
just yesterday, they were making the case that "we've been more
fiscally disciplined than any other state in the union over the
past five, six, seven years"; the per capita spending has
actually decreased tremendously from the levels of 1978 or 1979.
And while that's true, he noted, "I think that the public needs
reassurance that new revenue sources are simply not going to be
used for new programs, and that new revenue sources are actually
going to be ... used to solve the fiscal-gap problem."
SENATOR DONLEY opined that SJR 23, for the first time, would
give the public that assurance: within a reasonable parameter
allowing for growth, major new tax provisions would actually go
towards solving the problem and not towards more spending. He
noted:
That's one of my concerns with the governor's income
tax, is if you just take his proposed income tax,
which raises about $350 [million], and take the
accumulation of the possible increases in GF needed
for his spending increases, you've only got a little
over $30 million left to offset the deficit. That's
not much progress for a big tax, where if you limit
your spending - you don't increase spending - ... then
the money from the tax revenue will actually reduce
the fiscal gap.
Number 2036
REPRESENTATIVE OGAN said, "just to clear up the record," Article
IX, Section 13, says: "No money shall be withdrawn from the
treasury except in accordance with appropriations made by law."
He also noted that [Article IX] Section 6 says: "No tax shall
be levied, or appropriation of the public money made, or public
property transferred, not shall the public credit be used,
except for a public purpose." He offered that according to his
understanding of [SJR 23], since it doesn't make a withdrawal
from the treasury, the legislature isn't delegating its power of
appropriation; [SJR 23] just limits what the legislature can
withdraw.
CHAIR ROKEBERG asked what the distinction is between "what we
consider GF now and the amount of $3.328 billion." He said that
by a quick calculation, "the 4 percent's about $10 million - $10
million annual increase."
MR. TEAL said: "About $65 million to $70 million."
CHAIR ROKEBERG: "Is that based on a 2 percent or the 4 percent?
How does that work? We're talking about a 4 percent but we're
going back to the preceding year. So isn't the calculation
based on 4 percent of the preceding fiscal year?"
SENATOR DONLEY said: Two years earlier - not the exact
preceding fiscal year, but from the fiscal year before the
existing year. He added that the reason for that is that "we
won't have the final numbers to base it on ... so it really
works out to 2 percent a year."
CHAIR ROKEBERG said: "So ... it's 4 percent, but ... by the
math, though, it isn't necessarily; it depends on what you
appropriated in a particular year." He noted that he is
concerned about what happens if less than 2 percent is
appropriated, on a cumulative basis. Chair Rokeberg asked
Senator Donley whether his testimony is that "2 percent a year
against that ... would be about $66 million.
[Senator Donley indicated yes by nodding his head.]
MR. TEAL made reference to the graph in members' packets.
CHAIR ROKEBERG again asked for an explanation of the distinction
between "what we define as general funds now, in the budget, and
what is further included in this dollar amount."
Number 1881
MR. TEAL said, "I wish I had a fiscal summary here, because -
you've probable seen them - there are three columns: there are
general funds, federal funds, and 'other.'" The simple answer
to this, he said, is that it includes everything in the "general
fund" column and everything in the "other" column, and then debt
service is subtracted. However, it's a little more complicated
than that, he acknowledged.
CHAIR ROKEBERG said, "So we've got GF plus 'other,' less debt
service." "What does happen if, in fact, we have an
appropriation amount ... that is less than the budget limit; how
do you calculate that, the way this is drafted, if there is less
than a 2 percent increase the prior year?" he asked.
SENATOR DONLEY, after acknowledging that they were making
assumptions about the kind of spending pattern the legislature
has in the future, said:
Let's say that you'd had a steady spending pattern of
spending up to the limit. ... And then you came to a
year, which I think is the scenario you're asking
about, where you spent less than the limit. Well, you
would have a bump there; ... you wouldn't spend as
much, but then the increase for the next year that was
allowed would be based on the prior year. So it would
be higher, right, it'd go up. But it's a cap; it's
not a minimum, right, so you wouldn't have to spend up
to that. It would allow you to spend more in that
bump year, but since it's a cap, you don't have to.
You could continue to spend steady, and that bump
would correct itself in the next year because the
increase would be based on the lower, previous years,
then. ... You'd have a dip the next time.
But remember, you've got three provisions in here ...
to deal with it. Number one, by two-thirds vote, you
could increase the amount that's available to spend.
CHAIR ROKEBERG said, "I want to go the other way; I want to go
down."
SENATOR DONLEY: "Well, the more you held the line and decreased
the spending, eventually, the more the budget cap would actually
decrease."
CHAIR ROKEBERG said, "For example, when we had the five-year
plan we were actually reducing spending."
SENATOR DONLEY noted:
You would have to reduce spending as defined by this.
... We were always reducing the fiscal gap, and we
were always reducing GF spending, right, but in some
of those years, ... as defined this way, [spending]
might have gone up. So as long you're reducing the
spending, as defined, then your spending cap's going
to reduce also.
Number 1718
CHAIR ROKEBERG asked Mr. Teal whether this was correct, and
whether, as Senator Donley described it, there were any problems
with the way [SJR 23] was drafted. "Would you have any
problems, as the person that would have to make the calculation,
in doing this?"
MR. TEAL said that there were always going to be problems
because, five years from now, they're going to be [saying],
"Find the loophole, find the loophole." "So I'm sure we'll be
looking for loopholes," he added. But it's drafted, he opined,
as tightly as it can be drafted now, and the key to the question
of what happens if there is a sudden reduction is that it will
affect "the thing," though he cautioned against making sudden
moves like that because it will cause what Senator Donley called
bouncing, in later years. But if there are two years in a row
where the spending is reduced, then it won't bounce, he noted,
the limit would simply be lowered a little bit and then would go
along smoothly from that point on.
CHAIR ROKEBERG added, "To say nothing of the impact on the
economy."
SENATOR DONLEY noted:
We've discussed the possibility that if you wanted to
be really tricky, and you kept down spending in one
year but you wanted to maintain a steady flow, you
could simply appropriate money and not spend it for
that year. You could appropriate up to the cap and
have a block of money and put it in an account and
then not expend that money. ... And then it would
lapse back into the general fund, but your line would
continue up at a steady rate. So the legislature does
have some fiscal tools [available].
SENATOR DONLEY added, "If you wanted to utilize your fiscal
tools that are available to you to maintain a smooth, steady
growth, that's one of the tools you could use."
CHAIR ROKEBERG acknowledged: "Yes, you could, if you could get
the votes."
Number 1599
SENATOR DONLEY remarked that there is a lot of flexibility for
making "this" workable.
CHAIR ROKEBERG: "In both directions, I would hope."
SENATOR DONLEY said yes.
CHAIR ROKEBERG asked Senator Donley how he would respond to the
charge that "this is too liberal a cap on the upside."
SENATOR DONLEY noted that in his personal opinion, it is [too
liberal], but pointed out that he was trying to reach a
compromise for a supermajority: something that's reasonable but
which would be a "quantum-leap improvement" over what currently
exists in the [Alaska State] Constitution. He opined that [SJR
23] is a major improvement over what currently exists. In
response to the question of whether [SJR 23] was perfect, he
acknowledged that he did not think "we're going to get perfect
when it comes to something like this."
CHAIR ROKEBERG asked whether $66 million a year is too much.
SENATOR DONLEY noted that his first choice would be to have a
flat requirement for the next couple of years with some growth
after that, because, right now, the price of oil is depressed,
so there is an immediate problem. But [SJR 23] is not crafted
for this moment in time, he remarked; it's crafted to last a
longer period of time, and it is not known whether the price of
oil will go up dramatically in the next year. "It's happened to
us here in the past," he said, so the current fiscal gap could
disappear, just like it did two fiscal years ago when "we had a
surplus," not because production was higher or that less was
spent - although a lot less was spent, he added - but because
the world price of oil was higher, which could happen again.
SENATOR DONLEY noted that some of the criticism heard at a prior
hearing regarding [a different bill, SJR 24] is that [the
constitutional budget reserve fund] is projected to go away in
two years, and his rejoinder to that criticism is that it was
projected to go away almost ten years ago but that did not prove
to be true. He added that he hopes that "it" is still around
ten years from now, and if "we're" fortunate and the price of
oil bumps up a bit, "it" could stick around. And if that's the
case, he pointed out, then "we ought to make sure that it's
running and functioning as appropriately and smoothly as
possible, and [is] consistent with what the voters wanted it to
do in the first place."
Number 1501
REPRESENTATIVE COGHILL said he was still concerned a little bit
about the debt. He indicated that he was trying to foresee "how
much debt obligation do we have to get to before we've obligated
that percentage that's going to bump us against the top." There
will be a lot of pressure at [that] point, he noted, to sell a
particular issue every year and eat up that limit via [debt]
obligation. He also noted that with regard to federal money
that's taken in, almost all of it requires a match, so "we could
get ourselves obligated again, as we do now, with 'federal match
money issues' that would eat up that limit."
SENATOR DONLEY replied that the first scenario isn't a problem,
because the additional debt service that would go into the
operating budget for those bonds would be outside the limit. So
although he understands the concern - that by issuing the bonds,
the legislature would use up its flexibility to increase the
operating budget - that's not going to happen because it's
outside the cap. With regard to the second scenario, he
acknowledged that if there were a billion dollars in federal
funds available and the state needed "a hundred million" to
match it, that could be a problem. The legislature would have
to make a choice; it would have to prioritize, just as with the
capital budget, where the legislature does its best not to turn
down any federal funds that are available. But in the past some
funds have been turned down just because the matching funds
weren't available and those projects weren't as high a priority
as something else, he said. There will always be that unknown
potential out there, and that may eat into the increase, but
it's simply going to be a process of prioritizing where the
money will do the most good for the people.
Number 1403
REPRESENTATIVE COGHILL said that he agrees but noted that "we
have this insatiable appetite and ... this would bring that
pressure to bear as well, ... because [we] would have to
prioritize between taking federal money and/or using our own
resource money."
REPRESENTATIVE MEYER said:
First of all, I think, [with regard to the issue of]
the federal money, we've been pretty blessed with that
over the years, and ... maybe it will increase, but
time will tell on that one. But I do agree with the
Senator - if that's the case, we'll just have to
prioritize whether we want to do the federal matching
or not. [Regarding] the bonding [issue], which was a
concern of Representative Coghill's, again, we have
this in Anchorage where we have a spending cap or a
tax cap, whatever you want to call it, and then the
voters will approve whether or not they want to taxed
above ... this tax cap.
And then if they want to, then they go ahead and vote
for the school or the park or the new fire engine,
whatever the case may be. And ... I share the
chairman's concerns about if the amount goes up so
much every year, are we going to feel obligated to go
ahead and spend that whole amount; [by] then,
hopefully, we'll have a good, fiscal-conservative
group of legislators here, and we'll say, "No, we
don't need to spend that $66 million, and we don't
have to." ... I've looked at this and I've thought
about this [for] quite a while, and I do think this is
a good first step in tackling our fiscal gap....
Number 1301
BRAD PIERCE, Senior Economist, Office of the Director, Office of
Management & Budget (OMB), Office of the Governor, said that the
administration opposes SJR 23 because it's unnecessary and it
ties the hands of future legislatures [in] dealing with
circumstances the way they feel is most appropriate. He
elaborated:
One of the most important powers of the legislature is
that of appropriation, and it shouldn't be given up
lightly. We think this resolution has a superficial
appeal by imposing constraints on future state
spending that aren't effective under the existing
limit. It's being presented as a necessary precursor
to addressing the revenue side of our fiscal gap.
However, this disregards the budget cutting that's
taken place over the past several years and implies
that we're still some time away from being ready to
address the revenue side of the fiscal gap.
The fact that the current constitutional limit has
never been reached indicates that a constitutional
limit is not needed to control spending growth. Since
1982, when the current limit went into place, state
spending has been controlled by a combination of
limited available revenues and public opinion, and we
don't think that's going to change. Other states with
spending limits have had surplus revenues from income,
sales, [and] corporate tax receipts that increased
with their economic growth. [The] situation [in]
Alaska is entirely different; we're looking at the
decline of our resource-extraction revenue and ... no
income or sales taxes that grow with the population
and the economy.
The logic in this legislation doesn't make sense in
terms of what categories are included under the limit.
You remember the Gramm-Rudman-Hollings Act that
controlled federal spending back in the '80s; well one
of the chief provisions of that Act was [that for] any
new program, you had to find a new revenue source for
[it]. Well, this just stands that on its head ... by
putting a limit on spending for programs, even if
they're self-funding; we don't think that's
appropriate.
Number 1174
MR. PIERCE continued:
The proposed limit would have no relation to the
fiscal gap, which is a difference between general fund
revenues and spending. Other funds included in the
limit have no effect on the fiscal gap whatsoever.
Under the provisions of this resolution, any time the
legislature knowingly passed a budget that exceeded
the appropriation limit, the governor would be
required to impose across-the-board cuts on executive-
branch operations to reduce spending to the level of
the cap. It doesn't make sense to write a provision
into the [Alaska State] Constitution that says if the
legislature exceeds its own limit that the governor
has to go back in and fix it. Arbitrary across-the-
board cuts are an abrogation [of the] legislature's
responsibilities for setting appropriations levels.
And interestingly enough, this provision of this
constitutional limit, where the governor would have to
go back [and] make across-the-board cuts, doesn't
apply to the ... legislature's own budget. The limit
set in this resolution for 2004, in the new CS
version, is probably about $100 million too low, just
using the internal logic of 4 percent over the two
years' preceding budget. And that's because it would
round down the 2002 budget, subject to the limit, and
has no provision for supplementals in it.
Supplementals would be a big problem under this cap.
And there's some other technical issues here that ....
CHAIR ROKEBERG asked: Why would they be? Wouldn't they be part
of the fiscal year appropriation?
MR. PIERCE said that they would be, but then "you'd have to
leave some room for supplementals; you never quite know what
they're going to be."
CHAIR ROKEBERG noted, however, that "you have two years; the
supplemental's already been appropriated by the time you're
getting around to going back...."
Number 1099
MR. PIERCE said, "No, we're talking about 2004, where it's set
in the bill." Continuing on, he said:
But the main policy objection here is that it sets an
arbitrary spending limit without regard to cost
increases experienced by individual programs. Like
just the change in the rules for Medicaid that we're
facing in the '03 budget here, if this limit were in
effect, we'd be over the limit just because of our
change in a Medicaid match. It also doesn't take into
account university receipts [or] increases in other
fund sources such as [the] mental health trust, public
school trust income, or court-mandated expenditures.
The arbitrary percentage increase in the limit has no
relation to real-world drivers of public-service costs
such as population or inflation; it's just 4 percent.
We know for certain that the faster-than-average
growth of expensive [aspects] ... like school-age
children or the elderly, or medical costs/inflation,
... rises much faster than the overall CPI (Consumer
Price Index), and it'll have dramatic impacts on our
future budgets. During the past five years, the
legislature and the governor worked closely together
to allow self-funding programs - that have no effect
on the fiscal gap - to grow as needed to meet the
demand for services as long as fees that support those
services increased along with them. And this effort
benefited oil and gas producers, emerging fisheries,
other Alaska industries, pioneer home residents,
university and AVTEC [Alaska Vocational Technical
Center] students, and many others.
This amendment would throw out all that effort by
subjecting fee-supported services to the same
arbitrary limit. Why should self-funded programs like
[the Division of Occupational Licensing ("Occupational
Licensing")] or AHFC [Alaska Housing Finance
Corporation] corporate receipts ... be subject to this
kind of a limit? If the university brought in ...
more revenue and tuition receipts, [then] expenditure
of that revenue, if we're at the limit, would count
against the cap, and reductions would have to be made
elsewhere to accommodate [it]. There are numerous
other examples throughout the budget where this thing
would have similar perverse consequences.
Number 0900
MR. PIERCE also said:
I think natural resource developers should be
particularly concerned about something like this. One
of the major issues that emerged during the
legislature's five-year budget-cutting exercise was a
frustration by oil and mining and timber companies
trying to get their permits processed in a timely
fashion. Even though they were willing to pay for
expedited permit processing and the fiscal gap
wouldn't widen because of the receipts they were
bringing in, because they were self-supporting, the
legislature balked at spending this money because it
counted against the fiscal gap. So we moved those
self-funding programs from the general fund to fee-
supported services; other funds; and statutory,
designated program receipts. So these fees would be
back in the same old loop here, and these fees would
be subject to the same arbitrary limit that they were
under the five-year budget-cutting program.
Another major issue has already been referred to here,
and that's that spending for debt service is outside
the limit. This is a powerful incentive for debt
financing. Debt financing has the advantage of paying
for something over the lifetime of the facility, but
whenever we've had cash, we've been able to fund our
capital projects by cash [and] we've saved a lot of
money. It cost about one-and-a-half times as much -
to build something - to pay for it through debt as it
does to pay for something with cash, and you say,
"Well, we aren't going to be able to pay [cash for
things] in the future." But if we get big lease
payments for ANWR development or something like that,
it's possible that we could be in a position to pay
for capital projects with cash, and this limit would
not allow that.
Number 0743
MR. PIERCE said:
I think that [Mr.] Teal referred to the kind of
subterfuges and so forth that this thing would
engender. ... That's the first thing, probably, the
next finance chair would ask him to do, is, "How do I
get around this"; I know it's something that the next
governor [would] likely ask us to do, is, "How do we
get around this limit." It sets up a false hurdle
that really doesn't need to be there. One final
thing, and I wanted to stay to the bill here, but if
this limit were in effect, if this passed and the rest
of the Senate's fiscal plan passed and we had this pro
rata reduction bill combined with this limit, and the
governor was forced to make across-the-board cuts, it
would trickle down to everybody. It would [affect] K-
12 education payments, seniors/disabled [payments],
longevity bonus payments; everybody would share in
those across-the-board cuts, and we just don't agree
with that vision of governing.
So we don't think the legislature needs to be saved
from itself here. There's plenty of historical
precedence where the legislature didn't spend every
dime that it had available, including about $7 billion
deposited into the corpus of the permanent fund. And
we think the current committee substitute here for SJR
23 [Version R] is not much of an improvement on a
fatally flawed concept.
REPRESENTATIVE OGAN noted that he differed in his opinion
regarding what effects [SJR 23] would have, because he hopes
that a spending limit would cause the legislature to really
focus on what the state's priorities are. He mentioned that
perhaps the legislature would then look at "the 500 programs"
created since the influx of oil money, in order to reprioritize
and thereby avoid the situation of having to make arbitrary cuts
to every department. "I went through five years of that and I
was never real comfortable with that process," he said, because
it is difficult to know where to cut troopers or where to cut
education, for example. He offered the analogy of "money to
government is like blood to cancer: the more blood you give a
cancer, the more it grows." He asked Mr. Pierce, "Don't you
think that there's other ways to accommodate the problems that
this would create, rather than how you characterize it?"
There's more than one way that the legislature could make this
policy call, he opined, other than how Mr. Pierce characterized
it. He asked Mr. Pierce whether he agrees or disagrees with
that statement.
MR. PIERCE replied: "I don't know if I understand the
question."
Number 0521
REPRESENTATIVE MEYER opined that "obviously the governor ...
feels the need to have new taxes." He said that it would be "a
real hard sell" for him to go back to his constituents and say,
"We need more taxes because we want to keep spending like we
always have," when in his constituents' opinion, "we've ...
given them good reason to be suspicious of how we've spent money
in the past." He opined that [SJR 23] at least limits the
amount that the legislature has to spend, which, he surmised,
would help him when he has to go back to his constituents and
advocate for taxes or [permanent fund] use. He suggested that
[SJR 23] would help both the governor and the legislature. He
asked Mr. Pierce to comment.
MR. PIERCE said: "I'm just here to deliver the message."
REPRESENTATIVE JAMES complimented him on his delivery of that
message. She noted, however, that at issue is the public's
distrust of both the legislature and the administration. This,
coupled with the knowledge that soon the money will run out,
makes it appropriate to give the public a choice regarding
requiring the legislature to limit its spending. She said that
what she hears from the public indicates a belief that once "we
start charging them, there is no end [to it]." She asked Mr.
Pierce whether he understands that concept.
MR. PIERCE said:
Sure, but ... this is sort of a negative approach to
that. We come in here as people of good will trying
to do the best job that we can to govern, and so I
guess we turn it around and look at in a positive
aspect. You come down here, you're charged with
appropriating money, you're charged with developing
the budget, that's what people elected you to do, you
[don't] need to be saved from yourself.
Number 0288
REPRESENTATIVE JAMES said:
Certainly, I don't feel like I need to be saved from
myself; I'm sure everyone feels the same way. But
collectively, we need to be saved from each other, I
think, because, having been down here for ten years
now, it's not as easy as you think to look people in
the eye when they're on their knees begging for funds,
and say, "Sorry, we don't have any." And then when we
get home, the people are really distressed with us on
that issue. And ... there is the other concept:
let's have a constitutional amendment that limits how
much we can tax. ... I think Representative Croft has
such a constitutional amendment - limit 5 percent of
income taxes and 5 percent of sales tax. I can tell
you that people in my district don't want to pay
either one.
They wouldn't support a 5 percent limit; that's a lot
of money. ... So I don't know that we can get to the
tax limit in a constitutional amendment, but I think
we can get to a spending limit [via] a constitutional
amendment, and it seems to me that this is rational.
I agree with you - and I'll have you comment in a
minute - ... that there might need to be a calculation
on population and cost of living if we don't want to
squeeze ourselves into a little hole. But one of the
things that we have to assume that this is going to do
is get more economy outside of the government area,
and not so much counting on the government area to
provide everything for everybody. Would you think
that's a good assessment of where we really intend to
go?
MR. PIERCE said: "I don't quite know what to say; I really
don't know what you're asking."
CHAIR ROKEBERG noted that Mr. Pierce raised some interesting
questions relating to "the cap X and also the other
expenditures." He remarked that it took him seven years to get
[Occupational Licensing] "out of the GF," and that he was not
real happy to be trying to "put it back in here." He said that
according to his reading of the legislation, the "cash cap X
expenditures would be included in the caps." He asked Senator
Donley whether he has considered making that another exclusion,
or whether he would be willing to accept an amendment to that
effect.
SENATOR DONLEY, after mentioning that he'd taken some notes on
some of the points raised, remarked that one point addressed
related to the governor being charged with reducing the budget
to conform with the constitution should the legislature
"overappropriate", and yet such a conforming step would not
apply to the legislature's budget, only to the executive
branch's budget. He said that his response to that point is
that it is because the vast majority of the budget relates to
the executive branch; the legislative branch involves less than
1 percent and the court system involves only another 3-4 percent
of the total budget.
TAPE 02-11, SIDE A
Number 0001
SENATOR DONLEY, turning to Chair Rokeberg's questions, said that
one of the problems with excluding program receipts is that the
legislature can define and redefine what program receipts are,
and use that manipulation to just continue to spend more and
more by simply redefining. "When we made the 2 percent growth
assumption," he added, "we have been actively shifting things to
program receipts, over the past five, six, seven ... years, but
still the total growth, as defined by the constitutional
amendment, has been less than that 2 percent." So even as that
activity occurred, and as program receipts increased and more
services were being provided, he noted, "we were still living
within that 2 percent growth."
CHAIR ROKEBERG asked about tuition at the University of Alaska
and [receipts from Occupational Licensing]. He opined that
those are areas that will experience growth and do not affect
any "general appropriation money."
SENATOR DONLEY acknowledged that that is true. He noted,
however, that while they are included in the definition, the
definition incorporates an allowance for an increase. He also
pointed out that "it's been more than the traditional increase
that's occurred over the past year, including those funds
increasing program receipts."
CHAIR ROKEBERG said, "I got a problem with this because the
program receipts are stand-alone programs." He surmised that
Senator Donley apparently believed that "they could be
manipulated by the legislature to allow for additional
expenditure even though there was no income coming in from
them."
Number 0175
SENATOR DONLEY pointed out that they "have been moving more and
more things to that" [via] the definition, and that it is very
problematic because the definition can be changed.
CHAIR ROKEBERG recounted that prior legislation of his "had
three items from the House side, [but] when it ended up in the
Senate side, it had about 65 [items]." He mentioned that each
one of those programs had a source of funds, and they weren't a
"GF source of funds"; they were funds that were generated by the
particular program. He asked Senator Donley to explain to him
how that [type of example] would be manipulated "in that
category to raise spending."
SENATOR DONLEY replied: "Well, it's just that there's room for
-- if there was a way we could lock down the definition of
program receipts, I am certainly willing to look at it, because
I understand the point."
MR. TEAL noted that the point has been raised before, and it's a
good one: "Why would you want to do that." He remarked that
all he could say to that point is that that's the way the limit
was conceived. He offered that the legislature could probably
come up with another [item] to add to the list of exceptions -
number 11 - which would allow programs that are fully funded by
program receipts, statutorily, to be excluded.
SENATOR DONLEY added that if members had a suggestion regarding
specific language, he recognizes that that is a legitimate
public policy decision.
CHAIR ROKEBERG posited that if there were significant growth and
the University of Alaska actually raised its tuition to help
fund some of the "general tanks up there," the university should
not be dissuaded from doing so.
SENATOR DONLEY pointed out that it would have to be a pretty
massive increase "in fees and revenue from fees" to really
create a problem.
CHAIR ROKEBERG said that the trouble is that even if "they had
[$5 million or $6 million] here, and a $30 million Medicaid
problem, all of a sudden you're whacked up against the $66-
million cap pretty quickly."
Number 0366
REPRESENTATIVE JAMES said that she was totally opposed to
"making designated program receipts" because the [Alaska State]
Constitution does not allow dedicated funds, and "that is an end
run around dedicated funds." Some of the program receipts being
discussed aren't really program receipts, she opined, - they are
user fees. She added that as far as she is concerned, user fees
are a specific tax on a specific group of people doing a certain
thing, noting that she is not very supportive of user fees in
general. And although she acknowledges that use of the
university and use of [Occupational Licensing] are two very
valid examples, referring to program receipts or self-funded
programs is still problematic for her because she is not sure
that even that "would pass muster," since [SJR 23] would involve
making a constitutional amendment to a constitution that says
dedicated funds are not allowed. She said, "They sound
dedicated to me; I don't think I'd want to put it in there."
SENATOR DONLEY offered that they wouldn't really be dedicated
because they would still be subject to appropriation each year.
So they wouldn't run up against the "non dedication of funds"
clause, but there is certainly a public policy decision to be
made, he noted. He said that he would be willing to accept an
amendment adding program receipts to the list of exceptions, and
surmised that Mr. Teal's suggestion would be the best way to do
it. "You don't want to add programs that are only partially
program receipts, because then what happens is you would raise
the fees to offset GF and get around the spending [limit] that
way," he added.
CHAIR ROKEBERG said that despite some members' concerns
regarding dedicated funds and the constitutionality of licensing
fees, he is in favor of exempting program receipts. He remarked
that that there are some "quasi-judicial boards," which are
required by the legislature to be fully funded, that may want to
grow, but can't do so even for their own benefit. "This is the
same old fiscal-gap problem, because they'd butt up against the
ceiling again," he added.
SENATOR DONLEY said that if the committee wanted to give him
some guidance via a conceptual amendment, he would not have a
problem with that.
Number 0545
CHAIR ROKEBERG asked: What about the "cap X on cash?"
SENATOR DONLEY said, "Sure." He noted that the next point he
wanted to discuss pertained to the argument that somehow, if
Medicare went up, all of a sudden the state would be out of
money. That argument assumes that the program isn't going to be
modified or adjusted to stay within the state's means, he
pointed out, so there are other options rather than just running
out of money. He added that there would also be the
"supermajority safety valve," should the legislature decide to
continue to pay more. With regard to the cash-use issue, he
said that should the state get a huge cash payment, which he
deemed unlikely and certainly more than four years away, the CBR
should be repaid first and then built back up so that the state
has money available to act as a fiscal shock absorber. He also
noted that that money could be put into an account so that the
income from that money could be used to pay for the debt service
that the voters would approve through GO bonds.
SENATOR DONLEY said that the aforementioned option would be a
viable use of any big cash payment, and the voters would still
have the final say over what that money was being used for, but
there would be a fund source to pay for it. He said that he
hopes that the state, once again, has to worry about what to do
with giant cash payments. Senator Donley then spoke to another
issue raised earlier:
The idea of across-the-board cuts - the segue that got
off into the idea of proration - [I'll] just respond
to that briefly. Only if the budget was structured in
a certain way would the across-the-board cuts have the
kinds of scary impacts that the witness testified to.
Obviously, past administrations have actually sought
proration authority, ... because they were being
fiscally responsible; they wanted to reduce
expenditures. Unfortunately, our current governor now
has broken the billion-dollar mark, during his eight
years in office, for spending increases over that
time. And it's obvious that he is not the kind of guy
that wants to reduce spending - it's not [on] his
agenda. But governors who have wanted to exercise
fiscal discipline and reduce spending have wanted
proration authority to solve that, and clearly it
could be structured in such a way [so that] those
kinds of unwanted problems don't occur.
Number 0729
REPRESENTATIVE JAMES relayed her belief that in the event that
the spending limit needs to be exceeded, the concerns regarding
program receipts would be allayed by the [three-fourths-vote]
provision.
CHAIR ROKEBERG: "You're going to get a [three-fourths] vote to
raise the real estate license fee?"
REPRESENTATIVE JAMES suggested that perhaps a two-thirds vote
would be sufficient.
CHAIR ROKEBERG said that if the committee is willing, he would
offer a conceptual amendment to exclude those fully funded,
self-supporting programs, then all that would have to be done is
"lower the base from that amount."
MR. TEAL, to respond to Representative James, said that "you
couldn't get there with the two-thirds vote; you've got roughly
$50 million [of] statutory, designated program receipts and
another $50 million worth of receipt-supported services that are
out there now." So it's unlikely that "those" could be
addressed with the [three-fourths] vote either, he noted. On
the issue of a conceptual amendment, he said that it would
depend on how it's stated; if the language refers to "fully
funded", then Occupational Licensing, the Oil and Gas
[Conservation] Commission, and the [Regulatory Commission of
Alaska (RCA)] are clearly fully funded by fees or receipts, and
would be excluded. He remarked that the university, however,
still gets close to $200 million of general funds, so it would
be difficult to claim that it is fully funded.
CHAIR ROKEBERG said that he would stick with "fully funded" to
avoid the argument about whether "they're in or out."
SENATOR DONLEY pointed out that it's very unlikely that in any
particular year, the program receipts or other sources of
revenue would double; that would be a tremendous amount of
additional revenue. So as long as it wasn't doubling, he added,
there would be an opportunity to deal with it "within the 2 or
the 3 percent increase."
CHAIR ROKEBERG remarked that what he is saying is that $66
million may not go very far in a particular year.
SENATOR DONLEY said that "if that passes, we can make it work."
Number 0990
CHAIR ROKEBERG closed the public hearing on SJR 23. He made a
motion to adopt Conceptual Amendment 1, on page 2, line 10: "A
new [paragraph] (10), and move [current paragraph] (10) to (11),
that fully funded program receipts be excluded from the
calculation."
SENATOR DONLEY noted that other portions of [SJR 23] might have
to be adjusted slightly.
CHAIR ROKEBERG added that concept to his motion regarding
Conceptual Amendment 1.
REPRESENTATIVE OGAN asked whether adoption of Conceptual
Amendment 1 would allow the legislature to shift program
receipts around "to get them off budget," so that the budget
could be increased through the back door.
CHAIR ROKEBERG posited that the answer is no because they're not
off budget now, they're just in the "other" category, but they
are still available for appropriation. It just excludes them
from the ceiling here, he added, it allows them to go up because
they are self-funded.
REPRESENTATIVE OGAN acknowledged that point but indicated that
he still has concerns.
SENATOR DONLEY recalled that Mr. Teal had mentioned that it
would be similar to the Gramm-Rudman-Hollings Act in that "if
you can find your own source of funding, you can spend more
money." So if the fees go up, he added, that money can be spent
on more services.
CHAIR ROKEBERG concurred; if "BP" wanted to spend a million
dollars on a permit, then it could do so without affecting the
cap.
REPRESENTATIVE OGAN said that what he is concerned about is the
unintended consequences of creating a motivation for different
agencies to charge program receipts. Both government and
budgets would continue to grow if the legislature gave agencies
carte blanche with program receipts, he opined.
Number 1100
REPRESENTATIVE JAMES indicated that this is also a concern of
hers. There is a plethora of user fees out there, she opined,
for example, permits for sewers. She also indicated her
impression that the attitude appears to be, "If you need more
money, just raise the users' fees," which she considers to be a
form of taxation for a selective few. "I don't want to open the
door for that," she stated.
SENATOR DONLEY said:
What about this as a compromise ...: What if the
user-fee exception was limited to statutorily set user
fees so that the agencies wouldn't have the authority
to raise them just to create more bureaucracy, ...
that they'd only count the ones that we set by
statute. So then you'd have the safeguard of the
legislature being involved.
CHAIR ROKEBERG opined that that wouldn't work because [user
fees] are set by regulation.
MR. TEAL observed that it is by statute that Occupational
Licensing is supposed to set its fees; so while the fees are set
by regulation, it is the statute that directs that activity. He
noted that there are some Department of Environmental
Conservation (DEC) programs that are set up in a similar
fashion. "If you change it to programs which the legislature's
directed, [it] will be cost [recovery]," he added.
CHAIR ROKEBERG mentioned that it is just [Occupational
Licensing] "permitting" that he is concerned about at this
juncture.
MR. TEAL noted that permits are also "cost recovery."
CHAIR ROKEBERG indicated a willingness to amend Conceptual
Amendment 1 as Senator Donley suggested regarding a compromise.
REPRESENTATIVE JAMES said that although she is sympathetic to
this issue, she does not want to be trapped into building a
bigger government and causing some people to have to pay for
something they can't avoid. She said that she doesn't have a
problem with paying for the cost of doing business. That's not
the issue, she noted, it's just that it appears to her that the
more regulations and rules there are, the more it will cost -
the higher the user fees will become. She remarked that she has
"been here ten years and I've seen it happen, day after day
after day."
REPRESENTATIVE MEYER asked: "Isn't the safeguard in place with
the suggestion that the Senator had about having the increases
come before the legislature again?"
CHAIR ROKEBERG indicated that he thinks it is.
REPRESENTATIVE JAMES argued that "all the ones we've done came
before the legislature."
CHAIR ROKEBERG countered that not all of "them" have statutory
requirements to set the fees, which is what the amended version
of Conceptual Amendment 1 entails.
Number 1285
CHAIR ROKEBERG made a motion to adopt Conceptual Amendment 1, as
amended.
MR. TEAL indicated that the suggested language for Conceptual
Amendment 1, as amended, would involve: "Receipts which the
legislature has directed will be cost recovery, so that like
[Occupational Licensing] and others where, by statute, the
legislature says, 'Fees will be set to recover costs.'"
Number 1363
A roll call vote was taken. Representatives Meyer and Rokeberg
voted for Conceptual Amendment 1, as amended. Representatives
James, Ogan, and Coghill voted against it. Therefore,
Conceptual Amendment 1, as amended, failed by a vote of 2-3.
Number 1372
REPRESENTATIVE OGAN moved to report HCS SJR 23, version 22-
LS0734\R, Cook, 2/4/02, out of committee with individual
recommendations and the accompanying fiscal notes. There being
no objection, HCS CSSJR 23(JUD) was reported from the House
Judiciary Standing Committee.
ADJOURNMENT
Number 1380
There being no further business before the committee, the House
Judiciary Standing Committee meeting was adjourned at 3:08 p.m.
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